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Dow's Weakness and DP Indicators Suggest Gloomy Short Term

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It was only yesterday that I added a new BUY signal to the Dow's Scoreboard and today, it's already gone. The Short-Term Trend Model (STTM) is based on 5/20-EMA crossovers. The Dow's 5-EMA crossed below the 20-EMA while it was above the 50-EMA--that constitutes a Neutral signal. Had the crossover occurred below the 50-EMA, it would have been an STTM SELL signal. The Scoreboards clearly show



Today intraday low tested the rising bottoms trendline that forms the bottom of a symmetrical triangle. These patterns are continuation patterns so the expectation is a break out not down. Unfortunately, I'm seeing some real problems. The biggest is the 20-EMA converging with the 50-EMA. Moving averages are braiding, so I expect to see some whipsaw until this triangle resolves. The Dow is about to trigger an Intermediate-Term Trend Model Neutral signal. If the 20-EMA crosses below the 50-EMA (while above the 200-EMA), we will see the first neutral signal for the Dow in well over a year. I had been counting on a new PMO BUY signal to appear on the Dow after yesterday, but instead it has topped below its signal line which is especially bearish for momentum. Note also that the OBV has begun to trend lower.

If the Dow chart didn't concern you, maybe a look at our short-term indicators will. We saw the Swenlin Trading Oscillators (STOs) top in overbought territory and are now headed lower. This is bearish in the short term. 

The intermediate-term indicators aren't nearly as worrisome, but there is the problem of both the ITBM and ITVM turning down again. I usually don't start worrying until I see a negative crossover on them, but just noting that they have topped, at the same time the Dow lost its STTM BUY signal, is a caution flag.


Helpful DecisionPoint Links:

Erin's PMO Scan

DecisionPoint Shared ChartList and DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking


 

Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin


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Erin Swenlin
About the author: helped create and manage the DecisionPoint.com website alongside her father, Carl Swenlin. Together, Erin and Carl launched the DecisionPoint daily blog in 2009. She hosts the MarketWatchers LIVE web show at StockCharts.com, and is also a Member of the CMT Association. Learn More
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